Property Slump In Dubai To Last Until 2020

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Property Slump In Dubai To Last Until 2020

Prices for real estate in Dubai are likely to decline by 10% to 15% in the next two years. Due to geopolitical risks, new supply, along with the introduction of VAT or the value-added tax in UAE, all three factors are likely not going to spell a very good outlook for the city’s property market.

Such a grim prediction came after the prices for residential properties in Dubai dropped by 5% to 10% last year. The weak state of the property market has been hurting the overall yields of the top property developers in the emirates.

It is revealed that this particular correction will likely have to continue not just for the next year, but also for the year after that. Credit analysts for real estate and corporate ratings have made predictions that the downward trend will likely stretch out until 2020 where the prices are expected to finally be able to stabilise.

This grim outlook has also extended to both the retail and residential markets. Both markets have remained to be under pressure as a result. In addition, many hotels and similar establishments have to resort to accepting daily rates for their room. This is a necessary step in order for them to successfully maintain their level of occupancy.

Prices for properties have been down about 16% to 19% from their peak numbers that were recorded more than three years ago. This was revealed by the details released by the Bank of Kuwait for this month’s report.

It is highly expected though that the Expo 2020 which is taking place in Dubai is going to extend considerable benefits to the city’s property market. This is because economic activity is likely to increase and pick up thanks to the arrival of about 25 million visitors to the country along with new interested residents as well.

Still, experts are cautioning that there may be a risk of overbuilding in the property sector. If this happens, the effects are going to be felt even beyond 2020. A report by a property consultancy in 2017 showed that the planned supply for residential properties in Dubai will likely grow by a total of 9% for this year and 7% for next year.

However, Emaar properties came out with a report showing a 16% drop if their net profit in the fourth quarter of 2017. This is mainly due to the costs that are weighing on the many of the city’s large listed developers. This followed reports released by another property developer, DAMAC Properties, where they experienced a huge 47% plunge in their profit for the same period.

Geopolitical risks are playing a huge role in the price slide. Qatar and some of its neighbours in the Gulf are presently experiencing a standoff. This weighs heavily on the overall sentiment in the property market despite the fact that investors from Qatar are not really listed on the top 10 active investors in Dubai.

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